The latest fiscal measure presented by the Italian government, and now to be examined and approved by the Senate, has been and still is subject of debate - one of its most controversial points being Article 79 of the Legislative Decree n.124/2019. Not surprisingly, I might add, as it deals with one of the hottest topics of the moment, that one word that is hard to pronounce in front of green enthusiasts, the evil of our times - plastics.
Article 79 of the Decree, referred to as the ‘plastic tax’, proposes a one euro fee for each kilogram of plastic produced. As the Italian Environment Minister Sergio Costa stressed, the Decree follows measures recommended by the EU and aims to discourage the use of single-use plastic products (SUPs) and to reward with a tax credit firms which invest in biodegradable materials and in more sustainable production processes.
Although the intention of the legislation seems noble, it faces quite a significant opposition - some argue that the plastic tax could prove to be very detrimental not only for the whole food supply chain, which comprehends 76% of all plastic packaging, but for consumers too as the rise in firms’ costs of production could generate price inflation.
Whatever your opinion on the plastic tax is, you cannot argue against the fact that it has had at least the positive effect of putting the topic in the spotlight - as it already happened in other European countries. Similar measures supporting environmental policy are certainly not new to the European Union.
The EU budget as a ‘driver of sustainability’
Many EU politicians agree that a plastic tax would be a reasonable source of revenue. For example, Karmenu Vella, the European Commissioner for the Environment, Maritime Affairs and Fisheries, has stated that “the EU budget must be a driver of sustainability”.
In October 2019 the European Commission met to define the guidelines for a balanced EU long-run budget for 2021–2027, and agreed that the EU has to “identify new source of financing” and to “forge a closer link between the budget and policy priorities, such as climate policy”. The measures discussed can be described as ‘ambitious’ - the Union plans to devote at least 25% of its spending to climate objectives.
A suggested source of revenue would be a levy of €0.8/kg of plastic packaging waste that cannot be recycled. Many argue that it would be a ‘regressive’ form of taxation in the sense that it would hit poorer EU countries rather than rich ones, but Finland, which now holds the six-month EU presidency, claims that this is the measure of the budget proposal which has gained the widest support across member states.
What's so bad about plastics?
Plastics, as highlighted by the first ever European Strategy for Plastics in a Circular Economy adopted in January 2018, are one of the “key challenges of today”. The sector is critical for the European Union, employing 1.5 million people and generating a turnover of €340 billion (in 2015). However, plastics production and incineration emits 400 million tonnes of CO2 globally each year. Moreover, Europe generates 25.8 million tonnes of plastic per year, only 30% of which is recycled: 150,000 to 500,000 tonnes of plastic waste enter the oceans. SUPs such as drinks bottles, crisp packets, cups, cutlery and straws are among the top ten polluting items most commonly found on beaches.
The Organisation for Economic Co-operation and Development (OECD)’s report released in September 2018 for G7 Environment, Energy and Oceans Ministers highlights how all countries need to “rethink the use that is being made of plastics more generally” and to “restructure the way waste material is handled”. In particular, the weakness of the EU market for recycled plastics was unmasked by the recent import restrictions on plastic waste. The EU - and the rest of the world - used to exploit Asian countries’ cost advantage with respect to sorting and recycling - China, in particular, used to import 60% of global plastic waste. Following 2017 changes in China's regulations, however, EU exports to China fell from 100,000 tonnes per year in June 2017 to 10,000 tonnes per year in January 2018 - now, new policies are needed to address the issue at all stages of the life cycle of plastic products. Such policies, according to the OECD, need to be effective both on the supply and on the demand side. The report suggests some possible regulations, such as taxes on plastics production and consumption, new standards for recycled contents and labelling, and measures to increase consumers’ awareness and environmental education.
The goals that have been set...
Despite the delicacy of the issue, the European Union is doing pretty well compared to the rest of the world - it has already set more strategic objectives than we may be aware of.
We hear a lot about the EU Action Plan for the Circular Economy adopted in 2015, and the European Commission’s active engagement in the Paris agreement on climate change. Fewer readers will be familiar with Horizon 2020, the financial instrument implementing the Innovation Union, available for 7 years from 2014 to 2020, which has already provided more than EUR 250 million to finance R&D in the development of materials to substitute plastics. Lastly, the above mentioned European Strategy for Plastics in a Circular Economy has set some key objectives to reach a ‘new plastics economy’ which would promote reuse and recycling in the plastics sector - among them, increasing recycling rates up to 50%, improvements in sorting and recycling capacity and the reduction of Europe’s dependence on imported fossil fuel by 2030. Making the design of products more recycling-friendly, implementing the separate collection of plastic waste and creating profitable markets for recycled plastics are the main challenges of the plan.
...and how to reach them
But what can the EU practically do to achieve its sustainability goals, and how effective would such measures be?
A report was presented by ICF and Eunomia in May 2018 to support the European Commission’s impact assessment of policy proposals targeting SUPs. It analyses the effectiveness of some proposed EU measures against a ‘no-change’ option in the time range 2018-2030. Those measures are all grouped under the definition of ‘baseline policies’. Furthermore, it proposes and analyses further options against the ‘baseline’, identifying the ‘preferred one’, i.e. the one that would most significantly reduce the amount of marine litter.
As the research illustrates, some member states have already adopted measures to reduce their environmental impact. Certain types of plastics bags, for instance, have been banned in several countries such as Belgium, Denmark, Italy and France. France also plans on banning plastic cups, glasses, plates and cutlery by 2020. Spain is currently discussing a regional law which would require restaurants to provide free tap water to reduce the sales of plastic bottles, whereas Scotland has committed to completely banning SUPs and ensuring all plastic is recyclable by 2030, regardless of Brexit and the UK’s position.
The downside of these policies is, according to the report, the fact that they are unilateral and could fragment the single market. Instead, the ‘baseline options’ considered are EU-wide coordinated ones, including the Marine Strategy Framework Directive (2008, revised in 2017), the Drinking Water Directive, which aims to reduce the use of plastic bottles, or the Waste Framework Directive. It is estimated that these measures could help reaching the 50% plastic packaging recycling target – set within the Circular Economy Package – by 2020. Again, the European Strategy for Plastics in a Circular Economy also recommends further implementation of ‘extended producer responsibility’ (EPR) schemes to ensure higher producers’ commitment to the treatment or disposal of SUPs.
But will these measures be highly effective with respect to the reduction of marine litter and CO2 emissions? It is hard to tell. EPR does not require that member states adopt laws to make producers fully responsible for decreasing plastic waste, and the effect of fees depends on whether the taxed item can be easily substituted or not.
Best vs. worse case scenarios
The impact pictured by ICF and Eunomia’s research of such ‘baseline options’ against a ‘no change’ option is quite small: the forecast change in consumption is 0% for most items, and only for drinks bottles and food containers it predicts an increase in recycling rates - of 9% and 4.7% respectively - due to a higher packaging recycling target. Overall, the positive effect that such policies would have in the 2018-2030 period is very limited.
Instead, the report proposes five further policy options, named 2a, 2b, 2c, 2c+ and 2d, which are of increasing ambition in the impact they are supposed to have on preventing SUPs from entering the marine environment. The first one mainly consists in information campaigns, voluntary actions and mandatory labelling schemes, whereas the most ambitious one defines new reduction targets for plastic packaging, bottles and cups, and new standards for wastewater treatment works and civil society organizations to deal with SUPs. Moreover, option 2d introduces a deposit refund scheme on plastic bottles. It is estimated that option 2d could contribute to a 4 million tonnes reduction of greenhouse gas emissions per year, and it is therefore referred to as the ‘preferred option’.
The environmental impact of such options is summarized in the following table:
The most impressive figures are the ones under option 2d: the percentage reduction of marine litter (-74.5% of SUPs), the change in material demand (-786 kilotons of plastic demanded) and the decrease of greenhouse gas emissions (-3.97 million tonnes) are highlighted in green. These are significant numbers, if one considers that the benefits of recycling one million tonnes of plastics per year would be equal to taking one million cars off the road.
The report acknowledges that this policy option could have detrimental effects both on plastics producers and retailers because the production process may become more expensive and the demand for some goods might fall dramatically, following bans or restrictions on plastic materials. This, however, together with higher prices, would imply an increase in consumers’ savings, and therefore, a future expansion in the activity of other economic sectors. The shift in demand will depend on the ability of firms to switch to plastic-free materials and on the degree of substitutability of the products. Plastic bottles, for instance, have already been largely replaced by multiple use thermoses. Instead, substitutes for cotton bud sticks or plastic food containers are harder to find. Moreover, the challenges put forward by the necessity to fight plastic pollution are likely to have a positive effect on employment as, for instance, take-back and washing schemes for multiple-use products would create new job positions.
Will plastic stop washing up in our nightmares any time soon? Very unlikely. But the measures implemented by the EU over the last decade and mentioned in this article are a good starting point for policy actions, while the average recycling rates in the European Union are around 30% and among the highest in the world. However, this is not sufficient to address the greenhouse emissions and plastic waste problems. It is estimated that if we keep producing such big volumes of plastic, by 2050 there will be more plastic than fish in the oceans, and plastic will account for 20% of oil consumption and 15% of CO2 emissions.
In the collective mindset, environmental policies are not among the top priorities yet - the first thing that needs to change is our approach to the issue. The key to finding effective solutions is an ‘ambitious strategic vision’ - the challenges of today have to be turned into opportunities for the EU’s competitiveness and leadership. As long as we respond to this issue with only temporary problem-fixing, nothing revolutionary is going to happen. On the contrary, once we expand our mental framework and see them as a trigger for innovation, environmental policies can largely contribute to the EU’s long-run welfare.